EXR - Earnings call transcript Q3 2017 | Extra Space Storage Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning, ladies and gentlemen and welcome to the Third Quarter 2017 Extra Space Storage Inc. Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Jeff Norman, Vice President, Investor Relations.

Jeff Norman

Thank you, Andrew. Storage’s XXXX Space call. Extra to third earnings quarter Welcome

remarks have press supplemental Please In in with your the the prepared Act. statements as or our by the filings Litigation to review. results forward-looking we statements may remember uncertainties answers furnished contain our questions management’s associated Private due are in website. addition our risks forward-looking to listeners defined These by statements our could from the release, differ unaudited, statements forward-looking to implied on financial that company’s business. Reform Securities and Actual information those with cautionary which stated contained the to qualified company’s we and latest SEC, materially encourage

today, assumes forward-looking The I of X, the call Margolis, Chief of like Forward-looking market this Executive Thursday, of November no to to after Joe call. turn to any update statements or company represent statements, or because conditions date Officer. conference revise changing XXXX. estimates circumstances obligation over now management’s other would the as

Joe Margolis

Good Thank Jeff. morning, everyone. you,

for of as and that that and injuries each am I just very the be begin our take any all am of other safe teammates employees to and our of remarks, of family. our like importantly, want to grateful our I and Florida most to made are have teammates maybe we I They sacrifices humbled want has company take this. by to stores, I Before and in any say how very our Rico. Puerto to with of take care care Houston extra I a am in effort my went impressed that. the proud to customers, care stores and didn’t I associated say

say was growth I X.X% growth points XX.X%. and XX growth growth our result. basis If had as increased quarter, improved impacted properties and So posted totals, and to exclude the And revenue thank in start the stores X.X%, execution for actually we Throughout not remarks. NOI third to was strong Houston same-store was giving X.X%. basis solid NOI hurricanes Same-store that. will revenue adjusted we XXX my the XX X.X%, opportunity Florida to and for me from you points another FFO by

we So, our there produced operating occupancy the Florida the well-positioned driven no one-time events. portfolio, some was our did by quarter in benefit going in revenue forward, this the revenue outperformance long-term but benefit grow was be by benefit results to strong growth NOI quarter, and not by for don’t but and received third quarter. occupancy expect Houston and to diversified to is growth significant.

call, in details formerly markets the We Trust, management, as announced last the October planned, and have its posted as to known provided related we our On performance additional Storage our stores these Space’s supplemental effective financial system X. on website. left decided Extra Strategic that SmartStop, information of internalize XX to

with the count platform the to perspective, is had largest pipeline we of the the Trust approved properties. our our in added to Further, Strategic be this offsets Storage year loss of and approximately XXX end more between XXX stores. for managed store expect From we today, have properties our and we projected to to of add year now platform As total XX a XXXX added a history, have XXX XXXX already. over stores this

Extra growth Space. management continue be to driver Third-party for will a

XXXX. XX/XX contract, now properties in Proceeds under reinvested update been close portfolio the have would have provide be on The transaction by exchanges, arranged, XX and joint debt will plan that like we December contract. is for an under a I venture through other we has financing to recapitalization. to we marketed Finally, which store X,

the turn transaction be closes. additional like discuss time over to prepared this after details would Scott. will to We to I now

Scott Stubbs

the primarily the FFO of XXX basis you, point cleanup to at as tenant Same-store we stronger by more net XX.X%, hurricanes. quarter $X.XX. hurricane. rate. from a just The same-store the damage run high-end the quarter, beat total $X.X property FFO our Thank of of per increase We related recorded to adjusted for million to than reflect was continue exceeding adjusted existing as expected single-digits a result occupancy $X.X $X.X for markets an related claims additional recorded results. hurricanes. and increase. insurance program increase share, up was growth million been growth have The ended changes. our in back rate guidance Throughout accurately to of Last the the able to million customers to our low Joe. of the occupancy new in we wasn’t customer and and to Occupancy insurance due rates XXX for tenant losses These pool We a the without night, loss reported added in basis points. $X.XX non-hurricane we were the property

closed our During the number quarter under to subsequent third of a the went contract. of acquisitions or quarter, the and end

wholly-owned As $XX in another closed held million and of we today, stores have in joint $XXX acquisitions million in ventures. invested

million partners’ We year-to-date total $XXX in approximately another of our out in million. venture also several investment for other bought properties, investment joint interest $XX adding a

our properties is this our size end. X.XX%, million facility closing to X.X%. million last to our XX average and to rate of our the basis We have points private and to by of with have – expenses year-to-date, our increasing year to private a we fixed part NOI expense The our $XXX on debt only quarter. that X%. lengthen to focused budget term, and X.XX% draws of guidance of our $XXX been funded of long-term placement loan range revenue placement our annual funding to funding is and announced contract bottom we XX-year part our end maturities credit create We strategy the under raised Year-to-date, and same-store shareholders. ratio below acquisitions have acquiring to guidance X.X% our the annual our on performance expand debt value We lowered close that guidance pool. by another unsecured X.XX% on Based remain the scheduled for increase of we

of we $X.XX FFO $X.XX QX are our share. adjusted result per year guidance beat, a to As the as increasing to full

guidance of includes $X.XX our Our O value-add stores and also of dilution for from from total $X.XX C additional a of acquisitions $X.XX.

I value to are We outsized back exchange short-term creation. dilution call accepting now the some turn for in Joe. long-term will

Joe Margolis

quarter. Scott. XXXX are in resulting Demand With increase storage fundamentals to shaped steady you, behind rental performance has healthy. year been most we occupancy our leading The has each growth well in sector us and the has Thank in that up are allowed pleased rates. of and us, guidance

the rate As flattening. year, moderated the of the growth moderation the is beginning but since is expected, the of rate of our revenue

of We demonstrated are our record systems a and track environment team well execution. our confident equipped that maximize are has current the to in consistent revenue

unchanged this We two competitive felt environment some which new headwinds, quarters. acquisitions the previous also submarkets have impact expectations and from of have continue are the several development. in High seller

enhancing significant led XX However, quality these at us of long-term overall and challenges pricing allowed purpose-built while assets our will our present create portfolio. portfolio development our opportunities. that new of The the attractive competitive the the value for property acquisition shareholders to has acquisition to contract under market put

pipeline New generates footprint our which us the acquisition for resulted an today, and income our also a increases stream future. significant supply portfolio, has meaningful in provides in for managed growth

sheet, our Our climate. balance leading structure or and together of efficiently continue efficient three-pronged economic meaningful all our consistent performance ownership the FFO to goal positions with and return ultimate platform, current our maximizing sector grow to in external long-term investors’ on any capital. and to to same-store us the growth growth other This our contribute

the Let’s Q&A over turn start time the Jeff now to to session.

Jeff Norman

time address Andrew everyone that ask ensure everyone allows questions. start their address everyone’s questions, the questions, order we your have has session. with had will In will Joe. opportunity I questions keep turn ask to to over brief. an follow-on that, you, initial we once Q&A to If adequate Thank And to initial we it to time would

Operator

Mehta Fitzgerald. Our from line first Instructions] Gaurav comes [Operator of Cantor question with the

Your open. line is

Gaurav Mehta

I couple questions, A of Thanks. Good guess. morning.

your your ahead in quarter? same-store guidance of you was terms XQ raised and mentioned ‘XX. for expectations wondering expectation You in markets, the of outperformed market I was revenue your which

Joe Margolis

perform Palm continued West Las been very The Vegas markets also West general for Yes. Orlando well have and and us. the very, for to in the us. Coast strong markets

Gaurav Mehta

what’s expense guess, the guidance for side, ‘XX? on driving the I expense And growth

Scott Stubbs

growth, the right looks the around quarter like but expense to X%. really year we So Last more relates fourth its it negative comp. a elevated negative had quarter, fourth expenses, in tough

really is the year-over-year difference. So

Gaurav Mehta

Okay, thank you. all for me. That’s

Joe Margolis

Thanks, Gaurav.

Scott Stubbs

you. Thank

Operator

of ISI. with question Clark from Gwen next Our the comes line Evercore

Your line open. is

Gwen Clark

you Can about trends hear where sorry, rent – me? you can street talk

Joe Margolis

We can hear you Gwen. now,

Gwen Clark

guys today are headset. the talk And My what rates rent I just your guys Hey, trends move-in and street sorry, off that. about effective phone call then rate? about guess you Can are? where you where came

Scott Stubbs

Yes.

X%, third where of the rate X% the those quarter, and rates throughout moving strong. So achieved about our were were prior was October, ahead into our year continue and about street they

Gwen Clark

percentage Okay. early relative about today And your to expectations? have talk of as is that September. revenue how on piece, and a up know you of then I trending promotions guess fares as to seems I where been that Can that

Scott Stubbs

Yes.

we to of discount the our discount quarter. to use continue discount to of month way percentage about those, discounting revenue in a under receive of free rentals third a as discounts first some the be occupancy. just popular of to and So continue type and were we continues XX% rentals as Most X% move most

marketing can can You or you the probably move now, are your rate, right on more spend focused can move we side. move discounting a discounting you little and

Gwen Clark

that’s helpful. Okay,

headset/ And sorry the about again

Joe Margolis

Gwen. Thanks,

Operator

the KeyBanc of next line from question Markets. Todd with Our comes Thomas Capital

Your line open. is

Todd Thomas

hi, Yes, thanks.

year-over-year? provide where First, for and is us October occupancy an can you that

Scott Stubbs

end points. So, our year-over-year at occupancy was XXX quarter the basis of the

down have a to the in occupancy at elevated hurricanes end Florida a move gone of seen around outs the of kind bit, have seen That’s of has result X% closer we We delta October. the the primarily as come actually away. it some little the of

Todd Thomas

increase is like the the were in mix And X it the up that X%, in over by hits higher rate? little or rental is a then inbound conversion there? Okay. more quarter, – a driven activity rentals What’s

Joe Margolis

to little Scott those pointed various everything. of tools with we are this using the playing by have quarter. able a we out are tools as occupancy increase earlier, maximize And and It’s to we revenue constantly

Scott Stubbs

more saw activity hurricanes, also with Todd. You the

Todd Thomas

that? share how Is measure you or your How like? you something us rate you quantify can Okay. do around with there looks conversion rate conversion what would that your

Joe Margolis

don’t sorry. that share Todd, We information,

Todd Thomas

Alright, thank you.

Joe Margolis

Thanks, Todd.

Operator

line from comes the of question Bank Juan America. of with next Sanabria Our

Your line open. is

Juan Sanabria

the for time. thanks Hi,

be X, Just the on quarter the decelerating, you was midpoint at will a have the fourth that there had That where but revenue some or growth of see my Is beating of – you built that your guidance, question. that same-store kind you implies pace and first commented is the history of things, as know raising of X. in conservatism I you is thought of kind there? that

Scott Stubbs

Yes. Juan, would if The does on ending is depending the think so average your decelerations. you look to you X.X%. just you the third, kind the second I the of some below tell that you number I imply of fourth range, you somewhere quarter in quarter from X.X% – where but were in pick the quarter, the starting kind number, X.X%, sequentially after second at give

deceleration So, think some see has but in the it I fourth moderated quarter, significantly. you

Juan Sanabria

thought portfolio, half is of And quarter of fair think a of contributed performance little and the of a still that amount second it SmartStop the you occupancy the rest past I can talk the versus year? this in you – the flat when there relative and be bit just kind when the both to where that, about because

Joe Margolis

Yes.

So, the the terms of in points of rest to compared it’s XX within portfolio. basis occupancy

the on benefit, year rest of it same-store in right change the for year really We would XX average thinking top the started pool. of points the of it’s about add So, that basis on the portfolio.

probably Now, basis we on to closer are average. points XX

XXX it be would was points range. the at probably and of thinking year XX to the XX by it’s zero Our end basis higher start and end on the point the basis

Juan Sanabria

rest the anything... XX the of portfolio? points occupancy so is basis just And Is below to sorry, there the clarify

Scott Stubbs

pool. What it’s combination market-by-market. of am within well It’s I it’s have and a the as actually going rates the from XX close very in basis benefit provided but it’s saying it’s be as – occupancy points, that change so is, to

Juan Sanabria

Okay, thank you.

Operator

Our line comes George the with Jefferies. next of Hoglund from question

Your line is open.

George Hoglund

Hey, morning guys. good

landscape And one in for market? are out acquisition of from equity? noticeable change in what environment, of terms competitive guys in Just a private any any Has terms just change seeing the you you on question are the there there? portfolios is also, been seeing in there appetite how then the acquisitions the

Joe Margolis

Sure.

the saw and was last today volumes are of end I statistics through significantly. XX% So, transaction between down the XXXX quarter. The third

market So, or overall we see the lesser to we what that quality in chase. of would of the we is markets quality like what significantly volume on most is than product the down terms believe of

difficult suggest, environment. self-storage. as So, interest it’s in very equity significant you And private just a there in is

think our private people with prior are I new equity exposure we in better even to still this from estate we are other real reduced look than space. lot classes compete years, self-storage get that and and looking money numbers seeing to a asset

George Hoglund

M&A just then the given And equity past gone do XX to scale is you where in the up to the have sector? of Okay. following a that, XX as likelihood get stocks where think and some into looking over on private space money of the large amount the given of months,

Joe Margolis

Yes, really not sure large-scale M&A. could I am I predict

George Hoglund

thanks. Okay,

Joe Margolis

George. Thanks,

Operator

with Capital Neil of line the Markets. from comes question next Malkin Our RBC

line open. Your is

Neil Malkin

Have some the REITs In the sectors, give ability for to to access you C given are better have capital people stack. tightening who you dilutive the of more other provide impact sort just and way seen versus looking and less of environment to that mezz Good lease-up? of morning. seeing that outdated you kind mezz Hey, lending O the the we supply that the of of capital come to of just for part considering are financing the guys.

Joe Margolis

be question be frankly, really going a an acquisition be place thought environment. the attractively markets was to current a there good there capital could in in capital would the a and and mezz It’s we we given void there way we thought would opportunity

there be would under-leveraged with on to had don’t who where property. capital it try will ways some risk-adjusted we we’re to invest in debt some position over But made we – might I continue thought it, want returns. in long-term on have maybe be broken development be do be unwilling wrong. We to an and but to we a the a good to I just found us, an property. market, investor’s creative take that to opportunity. inquiries opportunity, assets for to we For find haven’t people be and We development at

Neil Malkin

last with nature this of comfortable what one the if you size pricing. and the and more you, stabilized see are given just relative me, O of are of to environment you And Okay. for your Are cycle? with pipeline? sentiment alluding assets for kind to enterprise of so, the that you Do the you C And getting increasing? comfortable part

Joe Margolis

questions. good Two

governor So all, on the we of first of amount dilution. internal an have

are best of that it. to is C can were that continue governor but deals at if we think pipeline, deals approved O we And X and value-add to O although O We Our attractive of we still approved and they you that ventures. joint and XX transactions the ventures. fewer this ventures. pipeline they executed year in of if good stores, development, do C One a of of quarter We look between. in dilution C every which XXXX, O and willing there accept. joint stay in C I within And number believe stay have in our participate so is are far execute joint within deals, of XX, monitor in are way, opportunities we to to see there in are far we our

of market, the were someone we So but – that participate. we costs that will location to we a makes never have we the has out are sense and of half year about extent the of continue that a prior, sense, pace makes to submarket

Neil Malkin

you. Thank

Joe Margolis

Thanks, Neil.

Operator

with Morgan of line from next Our question Vikram Stanley. the comes Malhotra

line Your open. is

Vikram Malhotra

for Thanks question. guys. taking the Thanks,

maybe a bit LA LA bit, compare and sort where Francisco if of decelerate the wanted to of San did more Coast bit and could quite a you Francisco Just markets sort to San a stable. seem more, was contrast West into dig

Just West next, wondering XX it, two? compare those if the what call to just the are X your and markets you expectations for could over Coast months

Joe Margolis

X%. So still growing de-acceleration at over rents and relative is we Angeles in Los are

it’s over real good pretty period long a can to that’s growths. you time higher think rent of and So, clip a hard sustain

new be very just is Jose, It’s strong those expect to built and San to are very markets. we Irvine going very don’t in those development. we get those much some markets difficult continue think but I see exceptions, because to markets. very There to to continue be overall, strong, things

Vikram Malhotra

what different just see peak I you now updated of then ‘XX and any pipeline And are when your ‘XX, into there couple sort thoughts towards to now, seeing expect coming am out figures just where thoughts wondering the be the supply from on impact seems this the supply? there markets in sort Okay. you of are of the of It deliveries. a end on and to is

Joe Margolis

But So, earlier we lower said that say XXX. give probably past, number, of range. XXX markets, the I question thing misplaced an I and are have where this year, to the we the would we to being to want we have think think caution these I overall towards important that built. as If in overall now, because asked number we the end are on stores update you’d are most is focus be on

example, for the growing and Dallas South East a several at child are of lot in possibly XX%, overdevelopment. poster of But development, revenue negative. where markets, slightly Dallas Dallas So North kind our are stores is of Dallas’

real where market, because to how stores country, the are the many built. being in being many being say even hard delivered stores are in overall what’s it how delivered stores So those number it’s are depends or a

Vikram Malhotra

Okay, good. Thanks, guys.

Joe Margolis

Thanks, Vikram.

Operator

from Ki line the Bin of Our SunTrust. with question comes Kim next

open. is line Your

Ki Bin Kim

figured Bin. This that am you I is sure Ki out.

are So, than obviously. a bit it just seems guidance, little better trending like results the

better the surprising the revenue, If always are factor had occupancy, that to that drive at expected? is look to managing variables in came you than you what all drive

Scott Stubbs

as more have on little pricing been year. expected we think I has tell I expected we able have power a in the you, well than bit as than been occupancy would better to early

Ki Bin Kim

bit is getting when just more private ways similar could provide if you say if your advertising or a market is So wondering because you that? you occupancy, the MSAs in dig on a in can different deeper, little you of color share taking are that uplift

Joe Margolis

never systems us we the to And in you convert get in really happy are We most can tell the on stick of with for people hard private I our where statistics most we It’s will into the we our and believe believe platform. good funnel there. but the market, out are. we people that

We improve well. system right pretty but are working always it, to now, going the is to try

Ki Bin Kim

you system, it outputting something during your much the and more versus say you your might when you of And do truly pricing how quarter? the subjective systems it is guys algorithms something and that do

Joe Margolis

the in situations So with our machine the of that whatever, revenue or are know work We it’s conjunction in our management front and road doesn’t just turn closed on run. don’t people in it and the our on machines, There data and science our teams people. ground a and and algorithms let our machine our combination algorithms. so a

Ki Bin Kim

you. thank Okay,

Joe Margolis

Thanks, Ki Bin.

Operator

next with Fargo. from question Wells Stender Our Todd the of comes line

Your open. line is

Todd Stender

we that acquired occupancies, and locations Can details of kind quarter, maybe guys. stabilization thanks in properties specifically the Hi, the hear on you stuff?

Scott Stubbs

Majority Combination Georgia, up bought of Carolina, one in a one Florida Virginia, venture did, North Massachusetts. or Occupancy few of one joint bought in we one things of in deals. and Certificate lease then are Occupancy those Certificate in we of in we

Todd Stender

one the maybe balance yields? you in your a are – versus willing going guess joint go Scott, take assumptions, growth in through go growth I to one rates annual and And you venture, on if can underwriting if you maybe through

Scott Stubbs

joint enhanced, exposure such the us to all partner underwrite size to us, venture the be we question to whether their and acceptable factors return, venture So, the which the to a same it’s we going that. store, offer but not return it sometimes to are or is a is would the of regardless us, wholly-owned as to different sometimes joint unacceptable market, of stores is

Joe Margolis

quite And the then frankly. sometimes dilution, just managing

Todd Stender

And dilutive number, an or number you annualized updated guys have maybe dilution an number?

Scott Stubbs

Yes.

$X.XX will Occupancy, that to current number our earnings. number stores of Certificate have at current of terms higher we than and $X.XX a in in then stabilize got our So, related

those from those of So, or of additional earnings $X.XX from properties. O C total lease-up

Joe Margolis

to a a frankly only unless the do give venture is sometimes, the transaction developers we bring stores joint willing we us they are basis to answer The will access joint do on complete to other venture. factor have that don’t a where

Todd Stender

color. Got it. Thanks for the

Joe Margolis

Todd. Thanks, Sure.

Operator

comes with next Kim Our the question from of Ki SunTrust. Bin line

Your line is open.

Ki Bin Kim

guys C doing or year, So, probably less are pace, quick are half done? up O that that is you just had of other the just players slack a you one, when this the picking it getting deals is

Joe Margolis

done. less say would I there is getting

Ki Bin Kim

That Okay. me. Thank you. it was for

Operator

would There to Joe questions are the like turn over further I back at Margolis. to time. no now call this

Joe Margolis

today Thank a you Have everyone Space and good forward shortly. Extra in seeing for your to interest look day. you

Operator

conference today’s This call. concludes

You may now disconnect.

Extra Space Storage (EXR) 5 Nov 172017 Q3 Earnings call transcript